Will EOG Resources Inc (NYSE:EOG) Shares Recover?


EOG Resources Inc (NYSE:EOG) shares were down 0.30% on Friday to $91.80 and flat in after-hours trading. Share prices have been trading in a 52-week range of $57.15 to $98.32. The company has a market cap of $50.84 million at 553.23 billion shares outstanding.

EOG Resources Inc is a company that explores for, develops, produces and markets crude oil and natural gas primarily in major producing basins in the United States, The Republic of Trinidad and Tobago, the United Kingdom, The People’s Republic of China, Canada and select other international areas. Its operations are all crude oil and natural gas exploration and production related, with its total estimated net proved reserves include approximately 2,118 million barrels of oil equivalent of which over 1,098 million barrels are crude oil and condensate reserves and approximately 383 MMBbl include natural gas liquids reserves.

With its stake in the energy sector, the profitability of the company is hugely dependent on the price of oil. Crude has seen a bit of a pickup in the past months but these gains have reached a standstill more recently, as traders started to doubt that an output deal will be struck in the OPEC meeting this month. Iraq has noted that it will not cooperate in a plan to cap production while Russia also expressed some hesitation, leading market watchers to speculate that the deal will not push through. Apart from that, gains in rig counts and crude oil stockpiles in the US have kept oversupply concerns in play.

Last week, EOG Resources Inc reported its Q3 earnings figures. The company incurred a larger than expected quarterly net loss of $190.0 million and a worse than expected EPS of -$0.35 per share, compared to a third quarter 2015 net loss of $4.1 billion, or $7.47 per share. For that period, lower crude oil and natural gas prices were mostly responsible for the downbeat results, offsetting the company’s efforts in productivity improvements and lease and well cost reductions.

Still, crude oil volumes of 275,700 barrels of oil per day in Q3 exceeded the midpoint of the company’s guidance by 3%. Lease and well expenses decreased 18% on a per-unit basis from the same period a year ago. Total crude oil production increased 1% while exploration and development expenditures fell 32%.

Even in a low commodity price environment, 2016 is proving to be a breakout year for EOG with record well productivity, sustainable cost reductions and organic growth in all our core plays, coupled with a historic transaction that adds substantial high-return growth potential,” said Bill Thomas, CEO of EOG Resources Inc. “EOG’s third quarter accomplishments reflect the hard work and ingenuity of our great employees and our unique culture.”

Moving forward, management raised FY 2016 production guidance to 278.5K-282.1K bbl/day, which at the midpoint is up 3% from prior guidance. The company  now expects to drill 290 net wells, 40 more than its prior forecast and 90 more than its original 2016 plans. It also increased capital spending guidance by $200M to $2.6B-$2.8B.

EOG’s future has never been brighter, and we are already in a position to make a material improvement to the long-term outlook we provided last quarter,” Thomas added. “The company-wide premium drilling strategy and the recently closed Yates transaction are significantly boosting capital efficiency and enabling us to extend our lead in unconventional resource productivity.”

In particular, EOG Resources Inc raised its estimated resource potential in the Delaware sub-basin of the Permian to 6B barrels, a 155% rise from the earlier estimate.

DISCLAIMER: There is a substantial risk of loss with any speculative asset, especially small cap stocks. The opinions expressed are those of the author, and do not constitute recommendations to buy or sell a stock. Do your own research before committing capital.